MatlinPatterson, Black Diamond Seal Foamex Deal
The pair had owned more than half of Foamex's debt.
May 28, 2009
After securing a restart to the Foamex International bankruptcy auction, distressed private equity firms MatlinPatterson and Black Diamond Capital Management were able to win the bidding with a $155 million offer for the foam products maker. The firms’ bid topped a competing offer from Wayzata Capital Investment Partners, which had appeared to win the auction last week before the bankruptcy court judge reopened the bidding.
The transaction underscores the inexact science that is bankruptcy M&A. In recent months, a number of would-be buyers have seen transactions unravel at the last minute. In March, Clarion Partners was able to acquire Lenox Group, upending a previously announced deal with KPS Capital Partners. Also, the following month, Patriarch Partners saw its deal for Polaroid blow up after the court sided with a lower bid floated by a team of Hilco Consumer Capital and Gordon Brothers.
Foamex, meanwhile, had agreed to an all-cash transaction with Wayzata valued at $141.5 million, but the bidding was reopened after MatlinPatterson and Black Diamond successfully lobbied the court to recognize its secured claims as part of its offer. The buyers had controlled more than half of the company’s debt.
MatlinPatterson, which made the stalking horse bid for Foamex, had also paired off with Bank of America to provide debtor-in-possession financing when the company filed for Chapter 11. Foamex expects to exit bankruptcy protection in June.
For the Pennsylvania-based company, which makes foam for mattresses and automobiles, this was the second time it has had to file for bankruptcy protection. It had previously emerged from Chapter 11 in 2007. This time around, Foamex blamed the economic downturn.
MatlinPatterson declined public comment for this story, and a call to Black Diamond was not returned by press time.
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